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More Transmission Lines Are Needed to Boost Wind Generation

Mon, 08/07/2017 - 12:23

Q: Which market scheme is best suited for the development of wind energy projects?

A: Wind energy projects manage high volumes of generation in Mexico. This technology is benefiting from PPA schemes and the long-term electricity auctions. Bilateral private contracts are gaining traction because the prices offered by wind projects are at least as competitive as conventional energy sources and usually, even more competitive. Additionally, they represent long-term price certainty. Long-term contracts can be established because O&M costs are low and there is no fuel in between, which means low volatility. Under the previous regulatory framework, it was not easy for small or medium sized consumers to participate in the PPA structure. Before, the off-taker had to become partner of the project in question. It was a game in which only big players could participate. Now, every consumer can participate without becoming a partner in the project. Before the implementation of the new energy model, we were used to having fixed prices for at least one month but now these prices change every hour. We also still have a methodology to define electricity tariffs and this is limiting smaller consumers’ participation in bilateral contracts. Long-term electricity auctions allow the purchasing parties, mainly CFE Suministro Básico, to fulfill their energy needs without the need of investing.